Iran war escalates to oil Hubs

The U.S.–Israeli military campaign against Iran took a dangerous turn on 18 March 2026, with tit-for-tat strikes on critical energy infrastructure that amount to the most serious regional escalation since the conflict began.

First, an Israeli drone strike targeted facilities at Iran’s Asaluyeh complex, damaging four plants that treat gas from the offshore South Pars field, which straddles the maritime boundary between Iran and Qatar. Tehran vowed to retaliate by hitting five key energy targets in Saudi Arabia, Qatar, and the United Arab Emirates. Hours later, Iranian missiles caused “extensive damage” to Ras Laffan, the heart of Qatar’s energy sector. Qatar’s state-owned petroleum company said additional attacks on 19 March had targeted liquefied natural gas (LNG) facilities.

Separate suspected Iranian aerial attacks also caused damage to oil refineries in Kuwait and Saudi Arabia and led to the closure of gas facilities in the United Arab Emirates. While much attention has focused on the unanticipated consequences of the U.S.–Israeli strikes and the de facto closure of the Strait of Hormuz, the targeting of energy facilities represents a worst-case outcome for regional states. Export revenues from oil and natural gas have transformed the Gulf states into regional powers with global reach, and that is now at risk.

Energy Becomes a Battlefield

The offshore gas field lying on both sides of the maritime boundary between Qatar and Iran is the world’s largest reserve of non-associated gas. Known as the North Field in Qatar and South Pars in Iran, its development began in the 1980s, leaving Iran and Qatar with the second- and third-largest proven gas reserves in the world, respectively.

While infrastructure was largely spared during the 12-day war in June 2025, the opening weeks of the current fighting have seen a significant loosening of restraints. On 8 March, Israel struck oil storage facilities in Tehran. In response, Iranian officials signaled that energy facilities were "on the table" as drones targeted the Shaybah oil field in Saudi Arabia, the Shah gas field in Abu Dhabi, and oil facilities in Fujairah.

Fujairah is a strategic hub located outside the Strait of Hormuz and serves as the terminus for the Abu Dhabi crude oil pipeline. This pipeline, which covers more than half of the UAE’s oil exports, has been repeatedly targeted as Iran seeks to disrupt routes that bypass Hormuz. On 19 March, Saudi authorities reported a drone strike on a refinery at Yanbu, while a ballistic missile targeting the port was intercepted.

Cascading Risks of Further Energy Attacks

Houthi forces in Yemen, allied with Iran, have previously struck targets around the East-West pipeline and led campaigns against shipping in the Red Sea. While they have refrained from joining the latest war, their threats to do so pose a catastrophic risk to oil markets. The attack on Ras Laffan is particularly significant, as it is the epicenter of the world's largest facility for LNG production and export. Early reports suggest that Pearl GTL, the world’s largest gas-to-liquids plant, was damaged. A second attack reportedly damaged 17% of Qatar’s LNG capacity, with repairs projected to take three to five years. A planned expansion to add six LNG trains by 2027 is also likely to be delayed.

The Burning Gulf State Dilemma

Iranian officials appear to view Israeli or American targeting of facilities in South Pars as justification for hitting the Qatari side of the field. This remains the case even though Qatar condemned the Israeli strike on Asaluyeh as a dangerous escalation. By autumn 2025, many officials in the Gulf feared that a new round of fighting would be far more damaging than the June 2025 ceasefire. This has now come to pass as an embattled government in Tehran spreads the cost of war. Despite official statements emphasizing their non-involvement in the U.S.–Israeli campaign, Gulf capitals are facing the brunt of the backlash. The scope of Iran’s attacks has moved beyond military facilities, such as the Al Udeid air base, to hit the travel, tourism, and energy sectors that underwrite the region’s transformation. If the energy sector remains in the crosshairs, the regional and global consequences of the war in Iran will be immense.

Kristian Coates Ulrichsen

Fellow for the Middle East at the Baker Institute, Rice University